Commercial real estate is prospering; it would do even better minus a tangle of regulations

You can imagine the troubled sleep Greater Des Moines developers are having these days.

The commercial real estate market is a developer's sweet dream wrapped around a regulatory nightmare, according to panelists at today's Business Record Commercial Real Estate Trends and Issues Forum.

Here are the makings of sweet dreams: Banks are lending, investment dollars have returned to finance big projects, employment is stable, new projects are pouring in and old projects have found new life.

To a person, the panelists, representing a range of commercial and residential developers, were upbeat about their businesses.

The things that go bump in the night include city, state and federal regulations that, according to Hubbell Realty Co. President and CEO Rick Tollakson, seem to come out of nowhere, not to mention bureaucratic delays that can add to project costs just as surely as a boost in wage rates and a rise in the price of materials. (Labor and materials are up, by the way.)

"The regulatory environment has continued to grow," said Gerry Neugent, president and chief operating officer of Knapp Properties Inc.

"It just builds on itself and starts to grow exponentially," Tollakson said. "At some point, common sense has to take place."

In response to a question about what cities can do to assist commercial growth, Denny Elwell Co. President and CEO Chris Murray said "understand our sense of urgency" and "empower staff to make decisions."

Having streets, sewer and water lines and other infrastructure in place rather than building it out in a piecemeal fashion also is critical, Neugent said.

Another bump in the night is the increasing complexity of financing a project.

"Capital requirements are becoming more difficult, but not as much as during the recession," said Jake Christensen, president of Christensen Development.

The discussion was moderated by Phil Hodgin, principal at RDG Planning & Design. One of his questions was whether developers consider investments in energy efficiency and other sustainable design features a crucial part of their projects.

Jackie Nickolaus, vice president of development for Sherman Associates Inc., said it is her company's "best interest to be as efficient as possible." However, there is little return in rents from tenants for investments in sustainable or energy-efficient features.

"Tenants want to be warm, they want to be cold, and they want it to work," she said.

Hodgin, who seemed to be surprised by the lack of enthusiasm for sustainable design, told the panel, "We need to have a dialogue."